Verizon has a new strategy to undermine online privacy and net neutrality

Verizon has asked the Federal Communications Commission to preempt any state laws that regulate network neutrality and broadband privacy.

The FCC's Republican majority is on course to overturn two-year-old net neutrality rules, perhaps by the end of the year. Broadband privacy rules passed by the FCC during the Obama administration were already undone by Congress and President Donald Trump early this year.

With the two sets of rules either gone or on their way out, it's possible that state governments might impose similar rules to protect consumers in their states. Verizon told the FCC in a filing last week that the commission should preempt laws in any state that does so.

Further Reading

Verizon said that Congress and the FCC "have recently made great strides toward restoring the light-touch regulatory approach that had successfully applied to Internet Service Providers for most of the last two decades."

But "some supporters of stringent regulation of ISPs are now looking to states and localities to frustrate these achievements," Verizon wrote. State broadband laws "pose a real and significant threat to restoring a light-touch, uniform regulatory framework for broadband service," Verizon said. "This white paper explains why the Commission can and should preempt these problematic state broadband laws and identifies several potential sources of authority for the Commission to do so."

California rejected broadband privacy law

The now-defunct FCC privacy rules would have required ISPs to obtain customers' permission before they use, share, or sell the customers' Web browsing and application usage histories. Legislators in some states have tried to replicate the laws on the local level. But the most notable attempt to do so, in California, failed after pressure from lobbyists.

Verizon is still worried that states might restrict how Verizon can use customer data. "[L]egislative bodies in nearly 30 states—including California, New York, and Washington—have considered adopting privacy laws aimed at ISPs in response to Congress’s repudiation of the Commission’s privacy rules," Verizon wrote.

While the California bill died in the state legislature, Verizon complained about a "recently filed ballot initiative in California" that would require "most medium and large-sized businesses (including ISPs) to maintain detailed records of disclosed information, to allow users to opt out of information-sharing in a way that would impair service to customers."

There are "multiple privacy bills pending" in New York, Verizon said. Moreover, Verizon is worried that "States and localities have given strong indications that they are prepared to take a similar approach to net neutrality laws." New York state and Portland, Oregon, are cited as examples in Verizon's filing.

Further Reading

"Allowing every State and locality to chart its own course for regulating broadband is a recipe for disaster," Verizon wrote. "It would impose localized and likely inconsistent burdens on an inherently interstate service, would drive up costs, and would frustrate federal efforts to encourage investment and deployment by restoring the free market that long characterized Internet access service."

"[I]n the absence of preemption, states with the most restrictive rules effectively would have the final say on the appropriate level of regulation, as many broadband providers as a practical matter will need to comply with the strictest state rules," Verizon also wrote.

Verizon filed this document in the FCC's net neutrality proceeding because it wants the FCC to declare state laws invalid in the same rulemaking that overturns the federal net neutrality rules.

The FCC’s limited preemption authority

It's no surprise that Verizon opposes net neutrality and privacy rules (despite the carrier claiming otherwise), and the FCC's current majority generally agrees with Verizon when it comes to regulation of Internet providers. But FCC Chairman Ajit Pai took a strong stance against preemption when the FCC in 2015 voted to block laws in North Carolina and Tennessee that prevent municipal broadband providers from expanding outside their territories.

Pai argued that the FCC didn't have the legal authority to block such laws. A federal appeals court ultimately agreed when it tossed out the FCC ruling last year.

Further Reading

Now Verizon wants the FCC to use the very same legal authority to prevent states from regulating broadband privacy and net neutrality. That authority comes from Section 706 of the Telecommunications Act, which lets the FCC "remov[e] barriers to infrastructure investment" in local markets in order to promote broadband deployment.

Verizon argued:

If Section 706(a) can reasonably be interpreted to provide an independent source of rulemaking authority, as the DC Circuit has found, then it would clearly allow for the preemption of state broadband laws. But even if Section 706(a) does not confer such rulemaking authority, it certainly imposes a mandatory legal obligation upon the Commission to advance the cause of broadband deployment, and thus allows the Commission to preempt state broadband laws that undermine its efforts to achieve that goal.

Using Section 706 to preempt state laws would be difficult after last year's court ruling that went against the FCC. "The FCC relies upon Section 706 of the Telecommunications Act of 1996 for the authority to preempt in this case, but that statute falls far short of such a clear statement," judges in the US Court of Appeals for the Sixth Circuit wrote in their decision.

Verizon said that if Section 706 can't be used to preempt state broadband laws, then the FCC should rely on two other pieces of authority:

Second, Section 153 of the Communications Act codifies the original regime of light-touch regulation for "information services," including broadband Internet access service, and thus further buttresses the Commission's authority to preempt state laws—like state broadband laws—that interfere with the Act's rule of light regulation for information services. Third, with respect to mobile broadband operators, Section 303 of the Communications Act authorizes the Commission to "[p]rescribe the nature of the service" provided; this provision, whatever its ultimate scope, enables preemption of state broadband laws that affect "the nature of the service" that mobile broadband provides in ways that run counter to federal policy.

Neither Section 153 or 303 includes any specific mention of preemption authority. Verizon also mentions Section 230(B)(2), which just says that US policy is "to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by federal or state regulation" but provides no specific preemption authority.

The FCC does have explicit preemption authority from Section 253, but Verizon doesn't mention this in its filing. Both Sections 230 and 253 are part of the infamous Title II that the FCC uses to regulate common carriers and enforce net neutrality rules. Verizon wants the FCC to stop treating ISPs as common carriers, and Pai is planning to make that change. (Pai worked for Verizon as associate general counsel from 2001 to 2003.)

Pai isn’t totally against preemption

Despite Pai's stance against overturning anti-municipal broadband laws, he isn't entirely opposed to preemption. In a separate proposal related to wireline broadband infrastructure, Pai's Republican majority will ask the public for comments on whether "we can and should use our authority to preempt state or local laws that inhibit restoration of communications infrastructure."

"We... believe that preempting state or local laws that inhibit the restoration of communications infrastructure will help to facilitate swifter and more effective recoveries from natural disasters such as hurricanes," the FCC says in that proposal.

FCC Commissioner Michael O'Rielly, a Republican, recently said he's open to using the FCC's preemption authority and that he wants states to be "barred from enacting their own privacy burdens on what is by all means an interstate information service," i.e. broadband access.

If Pai does want to preempt state privacy or net neutrality laws as Verizon requests, then the biggest questions would be how he'd justify it legally and whether the preemption would survive a lawsuit.